US median home price slides to a still ludicrously high $203K

[El Pinko]

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/09/25/BUQG134D3K.DTL&type=realestate


U.S. home sale price skids to $203,100 median
Alan Zibel, Associated Press
Thursday, September 25, 2008


(09-25) 04:00 PDT Washington - --

A record decline in U.S. home prices in August attracted more buyers in some areas and led to a sizable decline in the number of unsold homes on the market, the National Association of Realtors said Wednesday.
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The median sales price fell 9.5 percent to $203,100, the largest price decline in records dating to 1999. As prices fall, buyers are taking advantage of steep discounts, especially in hard-hit markets such as parts of California, Nevada and Florida.

"Time and price are the real cures for the housing market slump," said Mike Larson, an analyst at Weiss Research. The inventory of unsold homes fell 7 percent to 4.3 million, down from the all-time record of 4.6 million in July. That's a 10.4-month supply at the current sales pace.

The decline, however, merits only "a small round of applause" because five months of inventory is a more typical level, wrote Global Insight economist Patrick Newport. Also, many homeowners who don't have to sell are likely keeping their properties off the market. At the same time, thousands of properties are moving through the foreclosure process but aren't for sale yet.




The median price briefly flirted with a bubble-crazed $250K back in early 2007, and has fallen ever since.

http://investmenttools.com/median_and_average_sales_prices_of_houses_sold_in_the_us.htm

According to the census, median US household income is a stagnant $50K.

http://en.wikipedia.org/wiki/Household_income_in_the_United_States

Historically, houses have been priced at about 3 times the median income. Prices are still 4X that amount.


They've got a ways to go before they finally realign to the long-term trend at about $150K...



And don't forget this:

[OmahaBlueDog]

1. The median doesn't take into account regional variance

I can show you some really nice homes in West Omaha for under 200,000. You still can't buy a shack for that money in Palo Alto, CA.

[BlooInBloo]

2. Thanks, Captain Obvious. That's why it's call the *US* median.

[El Pinko]

3. The median income in Omaha is probably under $40K, meaning $200K is wildly overpriced for the area.

NT

[OmahaBlueDog]

5. In my zip code, median household income is over $100K

However, I live in an enclave of homes built in the 70s within my zip code. Nearby neighborhoods have homes for $300K and up.Most homes in my neighborhood are just as large in square footage, but don't have the ammenities such as granite countertops, bathrooms the size of small bedrooms, etc. The beauty is that my neighborhood is safe, and I get the benefits of all the shops, parks, and nearby excellent schools.

However, overall you're correct. Median household for the area as a whole is in the low to mid 40s (depending on who you believe).

[Hekate]

6. No kidding. Modest homes on the Central Coast still go for 3 or 4 times that

It would be more informative to do regional comparables. The now-foreclosed home on our street (4 BR 2BA 1500 sq ft) went for an insane $900,000 a year or two ago. The most recent asking price is around $650,000. Home prices may be in free-fall here, but they're still out of reach for nearly everyone. $203,000 sounds downright affordable -- so does $250,000.

Hekate

[OmahaBlueDog]

7. What is the median household income in your area?

Tahiti Nut mentioned downthread that prices would need to get to $150K or lower. My guesstimate would be a little higher -- about $170K, but not to terribly different. I'm simply looking at median US household income (about $46K, depending on who you believe) and multiplying it by 4, which used to be a quick-and-dirty affordability measure (your gross income x 4 =how much house you can afford). I've seen parts of CA where the multipliers are much higher.

[Hekate]

10. I no longer know. Home prices here have always been inflated due to scarcity...

The Santa Barbara end of the county is essentially a dry coastal strip with periodic drought, but with stunning natural beauty. It's a long commute down the freeway or over the mountains to the next place with relatively lower-priced homes, and those have gone up a lot too.

People come here for jobs or the beauty, or they're born here and have their own kids here, same as any place else. But there is no way that salaries can keep pace with what happened to home prices, and there are a lot of essential infrastructure jobs that are filled by an aging workforce or by commuters. That would be teachers, nurses, cops, firefighters. We found out just how many were commuters when the freeway was closed by a landslide a few years ago.

Hubby and I long ago realized that we could never buy in this town a second time; 25 years ago our little house was $161,500, and a guy at my then-job had the nerve to tell me what it cost when it was built 20 years before that (under $20K; I wanted to tell him to stfu).

A year ago it was allegedly worth a bit over $800,000. But if the foreclosed homes in our tract sell for $650,000, then I guess that's the new value. Or maybe my SIL and BIL (both former bankers) are correct that everything here is in free-fall with no end in sight. All I can guarantee is that homes won't hit $200,000 to match the median price in the rest of the country.

Hekate

[OmahaBlueDog]

11. I've been to SB, and it is lovely

However, I have no idea, as you point out, how you folks get teachers, cops, firefighters, burger flippers, etc.

I have a friend in the Bay Area. He works as a help desk/network admin type, his wife staysat home, and they have 2 kids. They paid somethig like $400K for a fixer in Castro Valley, and I have no clue how they make ends meet.

[Hekate]

13. The lowest on the scale live marginally: there's a lot of shared housing, & many garage conversions

As workers move up the scale they really do want to live better than that, so they sink a lot into rent. Some continue to share housing to offset this.

Hiring people from outside the area and expecting them to move here is a bear. The SB police chief was given substantial help with his mortgage when the city hired him. City College, where my husband teaches, has an aging faculty who own their own homes and will start retiring in waves in the near future. Some of the major employers operate van-pools for employees who live in outlying areas. It's not sustainable.

I'm amazed your friend's wife manages to stay at home with the kids, but I imagine they cut corners in a lot of ways.

Hekate

[TahitiNut]

4. It's got a looong way to go ... to below $150K before there's ANY recovery in sight.

The "bail-out" doesn't even begin to solve the two fundamental problems facing the economy. The major problem is the corruption of the economic system itself. The INSANE practices of the last 8-29 years in unregulated markets without transparency and without honest valuation that've been compounded by the fraudulent 'exotic' derivatives and the SEC permitting leverage ratios to go through the roof (30-to-1 and more) MUST be corrected ... aggressively and promptly. The result of this has "trickled down" to every working class person, inflating housing prices and deflating wages and salaries under a tax system that rewards corruption and penalizes labor. Unemployment will reach 10% (even with their fudge factors) before March of 2009. Count on it.

We're only seeing the beginning. Hold on. It's going to be a very rough ride. We WERE warned. We're fucked.

[girl gone mad]

8. I love that the media calls the mortgage meltdown the cause of our current troubles.

No, dummies. The easy credit fueled bubble was the cause.

Of course, the irresponsible media was cheering when housing prices went to the stratosphere and working people were having to shell out more of their income than ever just to have a roof over their heads.

[tkmorris]

9. Still too high

Home prices measured against income are what really matters. A good guideline used to be that you should not purchase a home that cost more than 2.5 times your annual income. The ratio of actual median home prices/median income from 1970 until around 2000 hovered around 2.8. Even with that crash in the median home price the ratio is still at over 3.3 nationwide, plus given the recent skyrocketing gas prices and resultant inflationary pressure on consumer goods people still cannot well afford to buy a decent home. Low interest rates help but not enough.

My guess is that home prices will need to fall to a median of around $175,000 to $180,000 before the market thaws out much. Plenty of folks who COULD buy right now are holding off, waiting to see which way the market will go. We are getting close but we aren't out of the woods yet. Summer 2009 should be about the time you will see the market stabilizing, IMNSHO.

[OmahaBlueDog]

12. It's funny how the guidelines inflated as well

You are right -- once upon a time, 2.5 was used as the affordability benchmark. Another measure was PITI = 1/4 monthly gross income. I guess, having started homebuying in the 90s, I was impacted by changing times; we were told 4 times gross annual income or PITI = 1/3 of gross monthly income.

[muriel_volestrangler]

14. Hah. In England, 2007 median house price to individual median earnings ratio: 7.26

Now, I know that's an individual's earnings, rather than a household, but even so, I think it shows that other countries have more problems with affordability than the US does.

Source: via http://www.communities.gov.uk/housing/housingresearch/housingstatistics/housingstatisticsby/housingmarket/livetables/ (Table 577).

And in some areas (eg the South East - population over 10 million, so it's a sizeable region), it's even higher - 8.47.

[El Pinko]

15. But the UK underwent a housing bubble of equal insanity to that in the US.

It's only a mater of time before prices there are much more sane...